Egypt: an ICT Economic Impact Analysis

The way a nation’s people collectively participate in the Global Networked Economy may seem like a complex topic that’s only relevant to the few academics and industry analysts that study these emerging trends.

However, recent events in Egypt offer insight about the close relationship between the cause and effect of Information and Communication Technology (ICT) policy decisions, and the likely resulting socioeconomic impact on the whole population.

In my prior dialogue with U.S. economic development practitioners, sometimes they would raise concerns about being unable to quantify the tangible benefits of telecommunications network infrastructure assets. Granted, it can be a challenge.

Moreover, there’s sometimes disbelief among less informed stakeholders that Internet access services have an essential role in enabling today’s common commercial transactions – or that the impact of a prolonged service disruption can be devastating.

Assessing Short and Long-Term Economic Impact

The OECD (ICCP/WPIE) was recently engaged in a country review of Egypt’s ICT policies when news broke about the Internet and related communication services shutdown. The following is an excerpt from an OECD press release last week.

“The Internet and communications infrastructure is a key platform to conduct business, connect people and provide government services. The Egyptian government has taken great steps in the past years to develop and promote the use and uptake of technologies. But the current shutdown of Internet and communications services for five days will have a pronounced economic impact. It is estimated to have incurred direct costs of at minimum $90 million. This amount refers to lost revenues due to blocked telecommunications and Internet services, which account for around $18 million per day — or, on a yearly scale, for roughly 3-4% of GDP.”

Unfortunately, that impact assessment is only part of the story. Yet to be determined, this estimate does not include the secondary economic impacts which resulted from a loss of business in other sectors of the Egyptian economy — that were directly affected by the shutdown.

According to the OECD, the IT services and outsourcing sector in Egypt had been a growing part of the economy. Relying heavily on the Internet and communications networks, IT outsourcing firms in Egypt made $1 billion in revenues in 2010 (or approx. $3 million per business day), servicing customers in other nations.

The OECD update concluded: “Egypt has other sectors that depend on Internet and communications, notably a vibrant tourism sector. It is difficult to put a number to the loss of tourism due to the Internet shutdown alone, but it provides an idea of how much the Internet has become part of mainstream economic activities, even in Egypt.”

OECD Information Technology Outlook 2010

Globally, ICT and ICT-related employment account for a significant share of total employment. The ICT sector had close to 6 percent of total OECD business sector employment in 2008, and long-term growth has been somewhat faster than for total business.

In the coming weeks and months I’ll periodically share insights from global and regional market studies from a variety of independent organizations that produce related market research.

On a more personal note, I’m hopeful for Egypt’s future. My mother was born and raised in Cairo. She told me about the people, the history and the culture of this nation. She left Egypt for Europe when she was 19 years old, but with many fond memories of perhaps the most enchanting city in the Middle East. Together, peace be upon you.

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